SME Times News Bureau | 22 Feb, 2020
Pitching for increased foreign direct investment in multi brand retail
sector, global management consulting firm Deloitte has said that the move would
expand the share of organised retail in the country, thus contributing towards
consumption-led growth of the economy.
In its latest thought leadership publication titled, Retail FDI in India,
Deloitte has highlighted the growing relevance of foreign direct investment
(FDI) and the government's openness on FDI in retail trade in the country.
According to the publication, the FDI-led expansion of retail would not only
boost consumption but would also provide the country's mom-and-pop stores
access to latest technologies that would form key to further growth of the
sector.
About 70 per cent of Kirana stores in big cities and 37 per cent of Kirana
stores in tier II cities want to enable themselves with new technology.
Availability of latest tools brought by global entities would thus help local
businesses as well.
Retail trading witnessed a year-on-year increase of 98 per cent in FDI inflows
in FY19. The foreign investments increased from $224 million in FY18 to $443
million in FY19.
Poised to be the third largest consumer retail destination in the world, India
is now an attractive investment destination for retail. The report underlines
the need for policy to address the trends of convergence of modern retail and
traditional retail and deeper penetration of organised retail in non-urban
areas - both of which make India a unique market for multinational enterprises.
In turn, global brands fetch capital investment, technology strength, and
infrastructure benefits for local markets; thus, bringing in new sustainable
retail models for an emerging economy such as India.
Commenting on the launch of this thought paper, a Deloitte India spokesperson
said, "Over time, with the help of regulatory assistance and on the back
of a sound policy environment, India has moved up from rank 130 to 63 in World
Bank's Ease of Doing Business Report. The country has emerged to be the only
one to have improved its ranking by more than 10 points consecutively for three
years. This trend has helped enhance investor confidence and propelled greater
inflow of FDI in India for retail."
With greater investment, some aided with FDI, traditional retailers and Kirana
stores can overcome operational challenges, such as lack of advanced technology
and modern payment tools and working capital issues. This clearly brings the
"best of both" to the Indian consumer, and with the advent of
technology it is a win-win situation for everyone."
The study reveals various reasons for the increased inflow of retail FDI in
India, including, but not limited to the new direct tax regime, local sourcing
norms, timely and effective implementation of GST, and change in FDI
requirements for the retail sector.
In addition to this, it paints a positive future for India's e-commerce market,
which is expected to grow at a compound annual growth rate (CAGR) of 30 per
cent due to growing internet penetration and increasing smartphone usage along
with the rising number of online shoppers in India.